‘Pay or burn’: Inside the gangland war over the tobacco trade netting millions
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Pay or burn. It’s become an open secret among Victoria’s tobacco shops that you have to pay the “tax”.
There is no mistaking the threat, not when at least a dozen tobacco shops have already been turned to cinders.
CCTV of an arson incident in Moonee Ponds on May 26, 2023, where the offender catches alight.
“If you want to open a smoke shop in Melbourne, you have to pay them. You can’t open in their area. They’ve made a kind of cartel,” said an underworld source, who spoke to The Age on condition of anonymity.
“People are told – these are the rules. You pay $1000 a week in cash. You sell our cigarettes. You don’t follow the rules, your shop will be burned the next day. You keep going, you get shot. It’s like the old protection money thing.”
The extortion of small tobacco shops, which can be found in virtually every suburban shopping strip, has become a cash cow for criminal syndicates, who are using the lucrative business to fund the drug trade.
The racket has become so profitable that Middle Eastern organised crime gangs and outlaw motorcycle clubs are warring for control, extorting and torching shops.
Police intelligence suggests a cartel is now “taxing” or supplying illicit tobacco to a significant portion of the independent retail market that operates from kiosks and shopfronts. Police and underworld sources said shops that refuse to sell the illegal tobacco are also being torched in retaliation.
The latest attack came on Tuesday morning, after a grocery store that advertised tobacco and vape products online was rammed by a car and set alight in the northern Melbourne suburb of Hadfield.
Fire Rescue Victoria said the car was reversed into the two-storey building housing the Hadfield Finest Fruit & Veg store just after 3am, warping the store’s door and breaking the windows. Firefighters discovered an LPG tank in the back of the vehicle.
The syndicate has spread to extorting shop owners nationwide, including in South Australia and Western Australia.
The trade is estimated to be worth millions – even tens of millions – of dollars each year to the racketeers.
And these profits are being ploughed back into criminal activities like drug trafficking and money laundering, six police and underworld sources say.
The racket exploded into public consciousness following more than a dozen arson attacks on tobacco shops stretching from Hoppers Crossing to Wangaratta since late March.
No one has been injured in the firebombings yet, but police say that’s down to sheer luck.
Police are investigating the cause of a suspicious fire at a tobacconist on Young Street in Moonee Ponds.Credit: Nine News
“Once a fire is started it’s impossible to control. It’s a real worry. These fools, without any planning, are setting shops on fire. It could be the family upstairs asleep that dies,” Detective Inspector Chris Murray, from Victoria Police’s arson and explosives squad, told The Age.
The market is being cornered by different players including well-known Middle Eastern crime gangs and outlaw motorcycle clubs, who see these isolated tobacco shops as “soft” targets that can be easily exploited.
The shakedowns have been running for more than a year but largely flew under the radar until the gangs began torching recalcitrant retailers and the “protected” shops of their rivals.
A Moonee Ponds tobacco and vape store linked to Sam “The Punisher” Abdulrahim was set alight on three separate occasions in late May and early June. Abdulrahim has previously denied his connection to the business despite promoting it on social media before the attack. The Age is not suggesting that Abdulrahim is himself part of any crime gang or involved in the illegal tobacco trade, only that a shop linked to him was a victim of recent attacks.
A tobacco shop linked to a notorious crime family that operates in Melbourne’s western and northern suburbs was also torched earlier this month.
Members of the Finks outlaw motorcycle gang were recently arrested after attempting to stand over a shop owner in Eltham.
“Victoria Police has had no interest in the illegal tobacco trade until now,” Murray said. “But when we start to see serious crime emanating from what is essentially a turf war about who is going to dominate the illegal tobacco market, we become very interested.
“If it’s a gap that serious and organised crime think they will be allowed to fill, then think again. Stupidly, they are turning a spotlight on themselves.”
The gangs have been drawn into the market by the massive profits that can be made with relatively low risk compared to drug trafficking.
The underworld source said a full-sized shipping container, which can hold up to 15 million cigarettes, is worth about $4 million in profit.
A packet of cigarettes bought for $2-$5 overseas and smuggled into Australia can be sold for $16 to $20 each when a legally purchased packet costs $30 to $40 or more.
With the price of cigarettes in Australia to increase by 5 per cent in September, law enforcement agencies say the illicit market will only become more alluring.
“You can make money easier with cigarettes than drugs. What’s the penalty for getting caught making $4 million on tobacco compared to $4 million on cocaine or meth? More than a decade in jail,” the underworld source said.
The aftermath of a suspicious fire in Melbourne’s northern suburbs.Credit: Nine
Illicit tobacco trafficking has historically been viewed as a victimless crime, federal law enforcement authorities say.
The discrepancy between the prison sentences for importing hard drugs as opposed to tobacco is a major concern among state and federal law enforcement agencies, which have been lobbying the government to increase the penalties.
“There needs to be tougher penalties,” said Murray. “It’s low risk, high reward. Looking through their eyes, they see it as very low risk.”
Australian Border Force officers intercepted more than 120,000 shipments of illicit tobacco at the border in the past financial year alone, the equivalent of $3.5 billion in lost government revenue.
Deputy Commissioner Tim Fitzgerald said the agency had fought to increase penalties for tobacco smuggling to include custodial sentences of up to 10 years, but it was ultimately up to judges and magistrates to dish out tougher penalties.
“We’re still in the process of educating the courts around the ramifications of tobacco, how organised crime is involved in using it for drug trafficking and money laundering,” Fitzgerald said.
In 2018, property developer turned cigarette smuggler Nabil Grege received a four-year jail sentence with a minimum of 18 months for illegally importing 18 million cigarettes worth $6.2 million in lost taxes.
Last year, a Victorian man was jailed for a minimum of 18 months on a three-year sentence for evading import duties worth $8.5 million on 10 million cigarettes.
Fitzgerald said more work was needed to further regulate the market and give additional powers to his agency to tackle the illicit trade. Victoria is among the last jurisdictions in Australia that do not require traders to obtain a licence to sell tobacco products.
“We need to do more work on the licensing regime associated with tobacco and vaping,” he said.
“These criminal syndicates are sophisticated and run like a business, so they’ll do whatever it takes to ensure that they continue to bring a profit at the expense of legitimate business owners and obviously the wider Australian community.”
Investigators are appealing for anyone who may have seen someone acting suspiciously near the scene of the Hadfield fire or who may have seen a silver Volkswagen Jetta or a white Audi around the time of the fire to contact Crime Stoppers on 1800 333 000 or report the information online.
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